Nonspouse Rollover and 5 year rule
Posted 05 September 2007 - 01:34 PM
Then in Q-19 it states that if a non-spouse bene rolls the proceeds, and if the 5 year rule was in effect under the Plan, then the the minimum distributions in the IRA are determined using the same 5 year method. So, following that language, the non-spouse would have to distribute the full amount from the IRA within 5 years, correct? And is that 5 years from death? Or 5 years from the rollover?
Looking at both of these Q & A sections it seems like if the 5 year rule is in effect then it is always in effect regardless if the non-spouse does the rollover in year 2 or year 4? Or am I missing something? Bottom line can the non-spouse elect the life expectancy method as long as they do the rollover by the end of the year following the year of death?
Posted 05 September 2007 - 03:13 PM
What the Notice is trying to explain is that if the benefits remain in the employer's plan passed the end of the year following the year of death and annual life expectancy payouts have not begun by the end of the year following the year of death, then all benefits will have to be distributed out (and taxable income) by the end of the fifth year after the year of death. This is so even if in the meantime there's been a rollover to an IRA; is so, the distribution by the end of the 5th year following the year of death is from the IRA.
On the other hand, if life expectancy payments have timely begun out of the employer's plan, then the balance of the benefits can be rolled to an IRA and the annual life expectancy payments continued out of the IRA. For the year that the rollover takes place, the minimum required distribution for that plan year needs to be made from the employer's plan and not from the IRA after the rollover is accomplished.
Edited by J Simmons, 05 September 2007 - 03:21 PM.
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